Annual exemption

Every tax year each individual is allowed to make gains up to the annual exemption without paying any CGT. The exemption is updated each year. Consideration should be given to ensuring that both spouses/civil partners utilise this facility. Different annual exemptions apply for Trustees of a settlement.

Main features

Capital Gains Tax (CGT) at the rate of 18 per cent applies to gains (including any held-over gains coming into charge) to the extent that total taxable income and gains do not exceed the Income Tax basic rate band. Any portion of gains exceeding this threshold is charged at 24 per cent. The same rates of 18 per cent and 24 per cent apply to gains from residential property, unless specific reliefs apply.

Disposals of chargeable assets must be reported if the total taxable gains in the year exceed the annual exempt amount (£3,000 for individuals and personal representatives, £1,500 for most trustees) or if the proceeds of the sale exceed £50,000 (even if no gain or loss is made). Unused losses may be carried forward to offset gains incurred in later years, reducing your future CGT liability.

Reliefs

There are certain reliefs available to defer or reduce the rate of tax on certain disposals, including:

• Business Asset Disposal relief, which applies to certain business disposals and reduces the effective rate of tax to 10%;
• Private residence relief;
• Business asset roll-over relief, which enables the gain on a business asset to be deferred until a point in the future;
• Business asset gift relief, which allows the gain on business assets that are given away to be held over until the assets are disposed of by the done; and
• Any unused allowable losses from previous years, which can be brought forward in order to reduce any gains.